Accor Shareholding at 31 March 2009
At 31 March 2009
Total number of Accor Shares = 219,894,523 Total number of Accor voting rights = 245,878,152
* Shareholders’ agreement between ColTime and ColDay (Colony Capital) and Legendre Holding19 (Eurazeo)
Colony/Eurazeo 30,14 %
Caisse des Dépôts et Consignation 8,5%
Fondateurs 2,75 % Société Générale
1,54 % BNP Paribas 0,56 %
Flottant 56,51%
Board Members & Founders
= 43.49%
***
Research Update: Accor S.A. Outlook Revised To Negative On Worsening Macroeconomic Prospects For Hotel Business; 'BBB' Affirmed
3 April 2009
Primary Credit Analyst: Philip Temme, London (44) 20-7176-3832;
philip_temme@standardandpoors.com Secondary Credit Analyst: Nicolas Baudouin, Paris (33) 1-4420-6672;
nicolas_baudouin@standardandpoors.com
Rationale
On April 3, 2009, Standard & Poor's Ratings Services revised its outlook on France-based hotel operator Accor S.A. to negative from stable. At the same time, the company's short-term credit rating was lowered to 'A-3' from 'A-2' and the 'BBB' long-term corporate credit rating was affirmed.
The outlook revision and short-term rating change reflect deteriorating conditions in lodging markets as a result of the worldwide economic slowdown, which will likely make it harder for Accor to comply with the credit metrics required for the existing 'BBB' rating, including maintaining a lease-adjusted funds from operations (FFO) to net debt at all times of at least 20%. Although credit metrics were satisfactory in 2008 and the group is less exposed than some of its competitors and benefits from continuing top-line growth in its Prepaid Services business, earnings will inevitably be affected by declining revenues per available room (RevPAR) in 2009.
Although the pace of lodging market decline in Europe lags the U.S. and European budget hotels, in which Accor is most represented, are less affected than in the U.S. or the luxury segments, occupancies are now falling in most countries and intensifying pressure on room rates will likely add to declines in RevPAR, particularly where operators' market shares in specific countries require them to be price followers. Within Europe, there is currently particular market weakness in the business travel segment in Spain and to a lesser extent in the U.K., Italy, and the Netherlands. Consultancy MKG is forecasting an overall drop in French RevPAR of 6%-9% in 2009.
Accor reported a solid 2008 performance (with lease-adjusted EBITDA margins rising to 22.8% from 22.1%) and is responding to deteriorating lodging market conditions with a 'battle plan' to reduce operating costs by €100 million (€75 million in 2009), to cut hotel capital expenditures to approximately €800 million from €1,015 million and to suspend its share buybacks and special dividends. Further cash conservation measures may need to follow. Nevertheless, despite real estate restructuring measures that have reduced capital intensity and cyclicality compared with the 2001-2003 market downturn, the lodging business inevitably has high fixed costs and high operating leverage, rendering it susceptible to negative sales trends. The market for hotel sales is constrained by a shortage of buyer financing, so proceeds from future disposals will likely be lower than in 2007-2008.
Two company-specific issues will likely offset some of Accor's cash conservation measures outlined above. A recent court judgment in respect of subsidiary Compagnie des Wagons-lits has left Accor with an additional €242 million tax bill. The exercise this week by Accor's controlling shareholder Colony Capital of its put option in respect of its 15% stake in French casino company Groupe Lucien Barriere SAS will increase Accor's net debt by €270 million. Standard & Poor's anticipates that Accor will be overall cash flow negative in 2009.
A corporate governance dispute in February 2009 led to the departure of six directors (including Accor's non executive Chairman). Standard & Poor's understands that this unusual degree of board turnover does not imply any change to financial policy or to the continuing position of Prepaid Services within the group. Accor's largest shareholder, the Colony/Eurazeo group, with about a 30%
stake, will have four representatives on the proposed new twelve-man board.
The ratings on Accor reflect its competitive positions in the budget and midscale hotel segments worldwide and its position as Europe's largest hotelier, as well as a degree of operating diversification provided by its free cash-flow-generative Prepaid Services business. These factors are partially offset by the group's high, yet reducing capital intensity and its intermediate financial profile after its substantial operating lease commitments (which comprise a large majority of adjusted debt) are capitalized. At Dec. 31, 2008, lease-adjusted FFO to net debt was 24.1%, net debt to EBITDA was 3.0x, and EBITDA interest coverage was 3.8x, which were all at the lower end of target levels for the ratings.
Short-term credit factors
In our view, Accor's liquidity is currently adequate to strong for the ratings, helped by the positive working capital cycle in its Prepaid Services business. At Dec. 31, 2008, Accor had cash of €1,253 million and undrawn committed lines of €1,345 million, compared with current financial liabilities of
€287 million. A successful €600 million five-year bond issue in February 2009 re-established the group's presence in capital markets and diversified funding. Accor's main revolving credit facility is not due for renewal until 2012 and has no financial covenants. The lowering of Accor's short-term rating to 'A-3' from 'A-2' follows as a result of our outlook revision and does not imply any deterioration to the group's liquidity profile.
Outlook
The negative outlook reflects Standard & Poor's concern that increasing recessionary pressures will likely make it harder for Accor to maintain credit metrics consistent with the existing 'BBB' rating, including maintaining at all times a lease-adjusted FFO to net debt of at least 20% and to maintain broadly positive free cash flow before development capital expenditure. A deep and sustained recession could require the company to consider further defensive measures to maintain credit metrics consistent with the current rating.
To return to a stable outlook the company will need to maintain operating margins at broadly 2007-2008 levels and to exercise substantial prudence in managing discretionary cash flows.
Ratings List
Ratings Affirmed; Outlook Action; Downgraded
To From
Accor S.A.
Corporate Credit Rating BBB/Negative/A-3 BBB/Stable/A-2
Commercial Paper A-3 A-2
Senior Unsecured BBB
(2)